The Saga of America and Britain’s Eerily Similar Self-Inflicted Collapse

Why Are Two of the World’s Richest and Most Powerful Countries in Such Deep Trouble?

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Question 1: Where are you more pessimistic about, UK or USA? The UK economy is doomed — but as a society it’s still pretty civilised, US economy will remain strong but as a society it’s… not great.

Question 2: Last year you spoke a lot about the near-term collapse of the UK — food, healthcare, and so on. Where do things stand today in the UK regarding collapse and how does that compare to what you thought was going to happen?

America and Britain, Britain and America. The Romeo and Juliet of social collapse. Let’s talk about them for a second. That amazing chart is from the FT. It shows the slow collapse of the American middle class. And Britain, post-Brexit, is following hot on its heels.

When I speak to my British friends, they’re remarkably… blasé. Brits do this thing of just refusing to face reality, which is the basis of lot of good comedy, but in situations like this? Where does Britain go from here? The short answer to that is that it becomes an American Red State.

By now, you probably know all my predictions. About Brexit. The economy was going to tank. Etcetera. How bad is it? Britain is doing so badly, it’s actually mind-boggling.

I said that Brits were blasé for a reason. They’re avoiding facing this reality. Nobody much in British society really wants to admit it. Not Rishi “The Schoolboy” Sunak. Not Keir “He’s Not Exactly Luke Skywalker, is he?” Starmer. Not columnists (hi Piers!), not intellectuals, not…much of anyone, at least in the halls of power. So the average person knows things are bad, because, well, that’s how they feel. But how bad are they, really?

They are so, so bad. We have never, let me repeat never, seen a nation once in the upper leagues of development, prosperity, and democracy collapse like this. Apart from, of course, America, which I’ll return to.

Let me give you the facts. These are facts every British person should know. By heart. Be talking about, every afternoon, at the pub. Be able to recite, and challenge their moribund leaders with. To the economist in me? Seeing statistics like these is like watching a horror movie…a massive, highway wrecking crash…a jet go down in flames….it’s not just some kind of accident, it’s unique, historic, jaw-dropping. All these utterly breathtaking stats come from Britain’s own OBR — Office of Budget Responsibility.

Real household disposable income (RHDI) per person — a measure of real living standards — is expected to fall by a cumulative 5.7 per cent over the two financial years 2022–23 and 2023–24. While this is 1.4 percentage points less than forecast in November, it would still be the largest two-year fall since records began in 1956–57.

On a fiscal-year basis, RHDI per person, a measure of living standards, falls by 6 per cent between 2021–22 and 2023–24. And in 2027–28, real living standards remain around ½ per cent below pre-pandemic levels.

On trade and productivity, we assume that the volume of UK imports and exports will both be 15 per cent lower in the long run than if we had remained in the EU, reducing the overall trade intensity of GDP.

Business investment has stagnated in real terms for much of the period since 2016, such that on the eve of the pandemic it stood 16.2 per cent below our pre-referendum expectations (relative to its level in the second quarter of 2016).

We expect trade volumes to contract in the near term as the economy stagnates and growth in the UK’s major export markets weakens. In 2023, imports fall by 4 per cent, dragged down by lower consumption and investment, while exports fall by 6.6 per cent.

Now, maybe that doesn’t sound like much to you. More’s the pity, because Britain’s economists — are there any good ones left? — should be explaining to people how shockingly, mind-blowingly, hair-meltingly bad this all really is.

Exports falling by almost 7 percent in a decade would be a catastrophe. But in one year? Imports falling by 4% over a decade would be something of a calamity. But in, again, one year? These are unreal numbers. They’re the stuff of actual economic ruin. Outside of events like Latin American debt crises, I don’t think we’ve ever seen them, and certainly not in rich countries, with one exception, which is America, and we’ll come back to that.

So, your trade is falling by 7% in one year. But the problem of course hasn’t gone away. It’s still right there, which in this case, of course, is Brexit. Those decline are going to continue. Where will they end? It’s anyone’s guess. The British economy now has to reach a “post-Brexit equilibrium — a smaller one” I used to say. Here it is, doing just that. But even I didn’t think an economy — at least a developed, wealthy nation’s could do things like see trade fall by 7% a year. Imagine that kind of collapse goes on for a decade or so. What are you left with?

This isn’t just an abstraction. This is reality. Go to Britain, and what do you see? You see shuttered down stores and shells of what used to be thriving businesses. You see poverty having exploded right there, on the streets. You can see the pain and despair on people’s faces. You can experience nothing working anymore, not even the most basic social systems.

That is what “My God, I thought Brexit was going to be bad, but 7% in one year?” — cue teeth chattering — looks, feels, tastes, lives like.

It’s not going to stop. It’s going to just…roll on. Did my predictions bear fruit? Well, that depends. Me? Personally I feel miffed that I underestimated how fast the collapse would happen, but that’s just the cold economist in me. Sure, you can say I was “wrong,” if by wrong you mean “Mom!! Umair said it’d take a decade, and it only took five years!” What’s for sure is that we have never seen anything remotely like this stunning scale, scope, fury, speed of ruin, which again, let me emphasize, is completely off the charts, in nations at the top of the league of global development and power and wealth.

Except in one case, and that’s America. How bad are things in Britain? There’s been a huge surge of people buying American style “health insurance” from, LOL, literally American hedge-fund owned companies, because the NHS doesn’t work anymore — good luck seeing a doctor anytime soon. But of course American style “health insurance”…bled Americans dry.

Britain’s future is to become an American Red State. It already is. And America’s future is also, perhaps, to become One Giant Red State.